ABSTRACT
In this paper we focus on public projects that provide a mixture of rival and non-rival consumption benefits. We adopt the basic elements of the Arrow-Lind model, but elaborate by assuming that a proportion α of the project’s benefits are rival in consumption while the proportion 1� α of the project’s benefits are non-rival in consumption. When α ¼ 1 the Arrow-Lind Theorem applies and the social cost of the project’s risk is negligible in a large economy; when α ¼ 0 the Theorem does not apply and the social cost of the project’s risk is positive regardless of the size of the economy. It follows that, the social cost of risk must decline in an overall sense as the degree of rivalry increases from α ¼ 0 to α ¼ 1, and as the size of the population increases, at least when benefits are perfectly rival.
